Legal Cost Specialists

Posts made in July, 2011

No cap in non-PI cases

By on Jul 20, 2011 | 2 comments

We’ve been exploring some of the problems with the Legal Aid, Sentencing and Punishment of Offenders Bill and how this may reduce claimants’ damages by rather more than 25% in personal injury cases. The situation becomes even more dire for non-personal injury claims. In relation to a professional negligence claim against, for example, an architect, there will be no cap on the success fee. Such claims are often strongly defended and it would not be surprising if any solicitor or barrister accepting such a case on a CFA basis would expect a 100% success fee. The costs of such claims can be significant and one would not be surprised to see base costs of a solicitor coming in at £100,000 if such a claim progressed to trial and, say, another £20,000 for counsel. That would leave the client with a potential success fee, to come out of any damages recovered, of £120,000 (plus VAT of £24,000). The claim would have to be worth at least £144,000 for the client to do no more than break even where the claim succeeds. In reality, if their damages are £144,000 they would be out of pocket to the tune of £144,000, even where the claim succeeds, as the recovered damages would disappear entirely paying the success fee. Indeed, the success fee payable may be far more than the damages recovered. Worse, in non-personal injury claims, although LJ Jackson suggested that qualified one-way costs shifting might be introduced, the government currently intends to implement this only for personal injury claims. That would mean that as well as facing an unlimited deduction from damages by way of success fee if the case is won, claimants will also face the prospect of an adverse costs order if the case is lost. In the past this could be dealt with by way of an ATE policy, the cost of which was recoverable from the defendant. In future, this will not be recoverable from the defendant. Claimants will therefore have to fund this potentially significant cost themselves. The alternative funding method that will, in future, be available for all types of claim is a contingency fee agreement (damages-based agreement). However, again, it will only be in personal...

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Success fee cap plus uncapped ATE?

By on Jul 18, 2011 | 0 comments

We looked the other day at the problems that might arise post-Jackson trying to instruct counsel to act under a CFA if there is a 25% damages based cap on the success fee that must be split between the solicitors and counsel. This might create a market for ATE premiums to cover own counsels’ fees for the small number of cases that go to trial, to ensure representation. However, the ATE premium would now come out of the client’s final damages cheque, in addition to the 25% success fee cap. And, of course, there has been no suggestion that ATE premiums will be capped. This would create the situation whereby if both solicitor and counsel act under CFAs, 75% of the client’s damages are protected (assuming the cap applies to both). However, if the solicitor acts under a CFA and the client needs to instruct counsel to act using an ATE policy to cover counsel’s fees, there is no corresponding cap on the total that may be taken from damages. It would be 25% (for the solicitor’s fees) plus an uncapped amount for the ATE policy. We may see claimants losing much more than 25% of their damages with these funding...

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Abuses in RTA claims portal

By on Jul 15, 2011 | 3 comments

Back in January 2010, I raised some concerns about the upcoming new RTA claims process. I wrote: “Much has been made of the fact that the level of fixed fee is set below the average amounts recovered by claimant lawyers under the current rules. Good news for defendants. But, and it may be premature to start looking for problems before we have seen the final rules, one issue looks likely to cause defendants problems unless expressly dealt with in the small print of the new rules. Under the current predictable costs regime, recovery of costs is governed by the level of damages actually agreed. If a case settles at a level within the small claims track the predictable costs scheme does not apply. However, under the new claims process the fixed fee of £400 for stage one, providing notification of the claim to the defendant, is payable at the point when liability is admitted. At this point there will be no medical evidence. The scheme is only meant to apply where the personal injury element of the claim is at least £1,000. The Ministry of Justice’s report recognises that some claims may be valued at the outset as having “reasonable prospects” of exceeding £1,000 but it later becoming clear that they do not. At that stage the claim will leave the process. However, I can see no mention of defendants getting their £400 back. Am I being incredibly cynical in thinking that there will be a very high number of claims that claimant lawyers value as having reasonable prospects of recovering over £1,000 only for these claims to undergo a surprising downwards revaluation or even disappear entirely after the £400 has been paid? There is no time limit under the scheme for obtaining a medical report and defendants may only discover several years down the road that they have been stitched-up in tens of thousands of claims.” Now, FOIL is reported in the Law Society Gazette expressing the following concerns: “FOIL also blamed claimant lawyers for causing delays in the portal process, and called for time limits to be introduced for claimants between stages 1 and 2. It added that insurers should not have to pay stage 1 costs...

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